Adidas sees growth against odds in Q3

Worldwide
Published:  16 November, 2021
Credit: Adidas

The sportswear brand has reported its third quarter results, with currency-neutral revenues growing by 3% despite external factors hampering demand and supply, the company said.

Adidas said that challenging market conditions in China, Covid-related issues in the wider Asia-Pacific region as well as supply chain disruptions caused revenue growth to dip by around €600 million (US$682 million) in Q3.

Growth was driven by the company’s direct-to-consumer channel, which saw currency-neutral sales increase by 5% in the quarter, a nearly 20% increase on the same period in 2019. Meanwhile, e-commerce revenues grew 7% year-on-year, a 64% increase on 2019.

Adidas saw momentum across all of its markets outside of Asia. Revenues in EMEA and North America both grew 9% during the quarter despite shipping and handling disruptions. Revenues in Latin America grew by a significant 55%, but sales in the Asia-Pacific region dropped by 8% due to extensive Covid-19 related issues. In Greater China, these problems as well as the geo-political situation and natural disasters caused revenue to decline by 15%.

Reebok

During the third quarter, Adidas signed an agreement to sell the Reebok brand to Authentic Brands Group for a total consideration of up to €2.1 billion (US$2.4 billion), and the majority of this is expected to be paid in cash at the closing of the transaction in the first quarter of 2022. Adidas intends to share the majority of the cash proceeds with its shareholders.

Full 2021 Outlook

With disruptions in Asia and elsewhere in the world continuing to affect the bottom line, Adidas continues to expect currency-neutral revenues to increase by a rate of up to 20%, but anticipates results will come in lower than originally forecast.

Consequently, both operating margin is also forecasted to reach the lower end of the previously communicated range of between 9.5% and 10%. At the same time, due to significantly higher supply chain costs as well as a less favourable market mix, gross margin is now expected to increase to a level between 50.5% and 51%.